Morgan Stanley's chief Asia economist Andy Xie warned Wednesday
that if the yuan is allowed to appreciate under international
pressure, China could be caught in a trap of low growth, low
interest rates and low inflation but a strong currency. The result
could be an economic bubble such as the one seen in Japan, China
Radio International reported Wednesday.
Xie pointed out that the macroeconomic situation in China today
resembles that of Japan when its currency was pressed to revalue
during its period of rapid growth.
At present, at least US$1.2 billion in "hot money" has entered
the Chinese mainland and Hong Kong as speculators gamble on a
revaluation of the yuan.
The Japanese yen was revalued in 1985, causing domestic
companies to move out of the country and invest in Southeast Asian
nations.
The low-interest policy that followed created an economic
bubble, with excessive investment in stocks and real estate. Japan
is still working to recover from the bursting of the bubble in the
early 1990s.
(Xinhua News Agency December 2, 2004)